RPVCCA_SR_2010_11_16_09_Employee_Health_Insurance_Premiums_For_2011MEMORANDUM
TO:
FROM:
DATE:
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
ERIC MAUSSER,HUMAN RESOURCES MA~
NOVEMBER 9,2010
SUBJECT:EMPLOYEE HEALTH INSURANCE PREMIUMS FOR 2011.
REVIEWED:CAROLYN LEHR,CITY MANAGER 09-
RECOMMENDATION:
Adopt Resolution No.2010-,a Resolution of the City Council of the City of Rancho
Palos Verdes amending the City's maximum monthly contribution amounts for
employee health insurance premiums for calendar year 2011.
EXECUTIVE SUMMARY:
Prior to the end of each calendar year,the City reviews its health insurance plans for
purposes of analyzing utilization trends,carrier-proposed premium increases and any
necessary adjustments to control present and future costs.These considerations are
balanced with the need to provide a competitive benefits package for employees in
order to attract,motivate and retain the best talent.Staff is requesting that the City
Council adjust the maximum contribution caps for employee health insurance premiums
that will take effect January 1,2011.The requested increase is due to the fact that
premium costs of the existing medical plans are scheduled to increase 12%in the HMO
Plan,PPO Plan and the HSA Plan.
BACKGROUND:
Since 1974,the City has paid the monthly health insurance premiums for its full-time
employees.The City has also paid for half of an employee's dependent coverage since
1979.In the current health benefits package,the City pays the full cost of the full-time
employees and any participating council member's medical,dental,vision and mental
health insurance benefits.The City also pays up to 50%of the cost of medical,dental,
and vision insurance benefits for eligible dependents.
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Subject:Employee Health Insurance Premiums for 2011
Date:November 16,2011
As more employers began moving towards partnering with their employees to reduce
the escalating cost of medical care by using Health Care Savings Accounts (HSA),the
HSA Plan option was initiated in 2008 to give employees greater control and incentive
to manage their health care costs.Under this approach,the City is paying the full cost
of the participant's medical,dental,vision and mental health benefits,and 50%of the
premiums for eligible dependents,and funding the full amount of the participant's
deductible.The deductible in 2011 is $3000 for the Employee Only and $6000 for the
Employee +1 and the Family (3 or more).
The City's total health insurance costs for FY 08-09 were $673,265.The total budgeted
amount for FY 09-10 is $668,168.
DISCUSSION:
When necessary,the City Council adopts a Resolution establishing maximum
contribution rates for health care insurance for the coming calendar year.The
"maximum contribution rate"is the maximum amount that the City will pay in total health
insurance premiums per employee per month.In the past,this amount was derived by
adding up premium costs of the most expensive medical,dental,vision and mental
health plans offered by the City,with the medical insurance premium making up the
largest percentage of the total contribution rate.The City has used the most expensive
plans to establish the contribution rate in order to allow participants the maximum
amount of choice in selecting their health benefits.However,not everyone chooses the
most expensive plans.For example,employees with dependents tend to choose the
[ower cost plans because they share in the cost of dependent coverage.
In the 2011 plan year,employees may select from three Blue Shield medical plans:an
HMO Plan,a traditional PPO plan with a $250 deductible,or an HSA PPO plan with a
high deductible pre-funded by the City ($3000 for individuals and $6000 for families).
Twenty-seven (27)employees selected the HSA plan for the 2010 calendar year.This
plan design has a positive effect on the City's efforts to incentivize participants to be
wise consumers of healthcare services and thereby impact future premium increases.
Trend medical inflation for calendar year 2010 was 20%.Blue Shield initially came
forward with a proposed 19%increase in premiums for 2011.Subsequent negotiations
lowered the cost to a final renewal of 12%premium increases in 2011 for the three
health plans.This renewal rate is significant in that many insurers were proposing
increases for other organizations at a rate of 25-30%due to utilization and the impacts
of impending federal healthcare reform requirements within plan offerings.
A complete survey of the insurance market demonstrated no other insurance company
can provide a significant reduction in premium cost.Therefore,we recommend
maintaining our relationship with Blue Shield of California.Additionally,maintaining Blue
Shield of California as our medical insurance vendor is important to our long term
strategy and the potential future financial impact of the patient Protection and
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SUbject:Employee Health Insurance Premiums for 2011
Date:November 16,2011
Affordable Care Act (healthcare reform statute).Our recommendation would establish a
"grandfathered"designation under the healthcare reform law.
The ancillary insurance coverages consist of Dental,Vision,Life &AD&D,Long Term
Disability and Employee Assistance Programs.For purposes of service and cost,these
insurances were moved from Wells Fargo Benefits to Maniaci Insurance Services,Inc.
effective January 1,2011 after it was found that Maniaci was able to bid those
insurances for a lower annual cost.Further,we were able to secure a 2-year rate
guarantee on the Dental HMO;a 4-year rate guarantee on the Vision Plan;a 2-year
rate guarantee on Life Insurance;a 2 year rate guarantee on the Long Term Disability;
and,a 2-year rate guarantee on the Employee Assistance Plan.We were also able to
add a Voluntary Life Insurance Plan,Pet Insurance Plan and a Legal Services Plan to
the benefits menu which are voluntary and employee paid (no cost to the City).This
action will result in an annual savings of $22,272.
Full-time employees and City Council members who can provide proof of medical
coverage that is generally comparable to the City's medical coverage,can decline the
medical coverage offered by the City and be reimbursed a flat amount each month
equivalent to 50%of the lowest medical insurance premium.In 2010,this rate was
$223.00 per month for full-time employees and City Council members.That rate would
be $249 for 2011.
FISCAL IMPACT:
The City will overall pay higher premiums for the health insurance benefits in the next
calendar year.However,it is difficult to estimate the actual cost at this time.This is a
result of the City being half way through the FY 10-11 before the increase takes effect
on January 1,2011.Additionally,the open enrollment period,which will end
approximately the first week in December,will see some employees change their plans
due to personal circumstances or changes.Those choices will have an impact on the
amount of premiums paid by the City in 2011.
Attachments:
Draft Resolution No.2010-
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RESOLUTION NO.2010-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO PALOS
VERDES,AMENDING THE CITY CONTRIBUTION RATES FOR EMPLOYEE
BENFIT PREMIUMS FOR FULL-TIME EMPLOYEES AND ACTIVE CITY
COUNCIL PERSONS FOR CALENDAR YEAR 2011 AND RESCINDING
RESOLUTION NO.2009-87
WHEREAS,on November 8,2010 the City Council adopted Resolution No.
2009-87 establishing maximum insurance rates for employee benefit premiums;
and,
WHEREAS,the increase in health insurance premiums in 2011 would exceed
the maximum contribution caps established in 2010;and,
WHEREAS,the City desires to continue to provide certain contributions to its
active full-time employees and City council persons for health benefits.
NOW,THEREFORE THE CITY COUNCIL OF THE CITY OF RANCHO PALOS
VERDES DOES HEREBY FIND,DETERMINE AND RESOLVE AS FOLLOWS:
Section 1:The City's contribution for each full-time employee or active City
Council person shall have a maximum amount which may be applied toward the
full cost of the active full-time employee's or active council person's medical,
dental,vision and mental health benefits,and pay up to 50%of the cost of
medical,dental,vision and mental health benefits for eligible dependents,subject
to the maximum amounts for these insurance coverages as specified below:
Insurance Status Full-time Employee/Councilmember
Maximum Contribution per Month
HMO or PPO HSA
Employee Only
Two Party
Family
$898.98
$1333.13
$1623.64
$592.76
$877.94
$1072.54
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Section 2:The City will pay towards the participant's deductible in the HAS Plan
$3000 for Employee Only and $6000 for Employee +1 and Family (3 or more).
Section 3:Any amounts remaining between the necessary contributions required
and the maximum amounts specified in Section 1 of this Resolution are not to be
paid to the active full-time employee or active City Council person,as applicable.
Section 4:If a full-time employee or City Council member can provide proof of
medical coverage that is generally similar to the City's medical coverage,and
declines the medical coverage offered by the City,the city will reimburse the full-
time employee or City council member $223 per month.
Section 5:The City shall pay the full cost for each active full-time employee's life
insurance premium,accidental death &dismemberment premium and long term
disability premium.The City shall pay the full cost for each active City Council
member's life insurance premium.
Section 6:The City Manager or his/her designee,is authorized to adopt rules
and procedures for the implementation of the Resolution.
Section 7:Resolution No.2009-87 is hereby rescinded and replaced by this
Resolution.
PASSED,APPROVED and ADOPTED this 16 th day of November 2010.
Mayor
Attest:
City Clerk
State of California
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County of Los Angeles )ss
City of Rancho Palos Verdes )
I,Carla Morreale,City Clerk of the City of Rancho Palos Verdes hereby
certify that the above Resolution No.2010-_was duly and regularly passed and
adopted by the said City Council at a regular meeting thereof held on November
16,2010.
City Clerk
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